Von Clausewitz, List, the Bormann Capital Network and the Subjugation of Europe

COMMENT: To come to under­stand what is tak­ing place in Europe, it is essen­tial to under­stand the mil­i­tary phi­los­o­phy of Pruss­ian mil­i­tary the­o­reti­cian Karl von Clause­witz. In All Hon­or­able Men, James Stew­art Mar­tin high­lighted an impor­tant aspect of von Clausewitz’s phi­los­o­phy, that war and diplo­macy are two sides of the same coin. When diplo­macy is no longer effec­tive, the pol­icy goal is pur­sued through the use of armed force. When war and mil­i­tary power have reached the lim­its of their effec­tive­ness, diplo­macy con­tin­ues the pur­suit of the goal.

Hav­ing plun­dered, pooled and secreted away the liq­uid wealth of Europe, the net­work was in excel­lent posi­tion to real­ize the von Clause­witz gam­bit of the post-war, explained below.

Beyond that, the Bor­mann cap­i­tal net­work is more than just the fruit of World War II plun­der. The organization’s vast wealth derives from cor­po­rate power and the busi­ness and polit­i­cal bro­kers that admin­is­ter that influ­ence. Heav­ily invested in major cor­po­ra­tions (espe­cially Amer­i­can “blue chip” cor­po­ra­tions) the group can exert great pres­sure with lit­tle effort.

Of course, when that doesn’t work, the Under­ground Reich will not hes­i­tate to use deadly force.

19th Cen­tury pan-German the­o­reti­cian Friedrich List fore­saw a Ger­many eco­nom­i­cally astride Europe as a vehi­cle for world dom­i­na­tion. The Under­ground Reich has real­ized the Nazi goal, for­mal­ized through the Fed­eral Republic.

. . . . The end of bat­tle in 1945 had sig­naled the start of a new kind of war–a post-war. Germany’s clas­si­cal mil­i­tary the­o­rist, von Clause­witz, is famous for hav­ing declared that “war is the con­tin­u­a­tion of diplo­macy by other means.” In deal­ing with a Ger­many which had gone to school with von Clause­witz for gen­er­a­tions, we knew that, con­versely, a post-war is the con­tin­u­a­tion of war by other means. Since Bis­marck, wars and post-wars have formed a con­tin­u­ous series, chang­ing the qual­ity of the events only slightly from year to year, with no such thing as a clear dis­tinc­tion between heat of bat­tle and calm of peace. This post-war of the Ger­man occu­pa­tion was dif­fer­ent from the “cold war” between the United States and Rus­sia, which broke out at about the same time. The lat­ter com­pli­cated the diag­no­sis, like a man get­ting typhoid fever and pneu­mo­nia at the same time. . . .

COMMENT: In ana­lyz­ing the deba­cle of the euro­zone cri­sis and the tragedy of Greece, it is worth not­ing that unfor­tu­nate coun­try is essen­tially being sys­tem­at­i­cally occu­pied, eco­nom­i­cally col­o­nized and enslaved using the von Clause­witz con­cept of “other means.”

We’ve seen that the pro­vi­sional Greek “aus­ter­ity” gov­ern­ment includes the Greek neo-Nazi LAOS party, installed with no input what­so­ever from the pop­u­la­tion of “the cra­dle of democracy.”

. . . Recently, a rightwing extrem­ist party was again made a direct coali­tion part­ner in a country’s gov­ern­ment — in Greece. The newly installed tran­si­tional gov­ern­ment — imposed under the super­vi­sion of Berlin and Brus­sels — includes not only the con­ser­v­a­tive and social demo­c­ra­tic par­ties but also the LAOS Party (Laikós Orthó­doxos Synager­més, “Ortho­dox People’s Alarm”). The LAOS Party musters also par­ti­sans of the for­mer mil­i­tary dic­ta­tor­ship and is known for its racist and anti-Semitic invec­tives. Gior­gos Karatzaferis, LAOS Party Chair­per­son, is quoted to have pro­claimed that he is proud “not to be Jew­ish, homo­sex­ual and com­mu­nist,” which “only few can claim.“[5] He is said to have called out to the Israeli ambas­sador: “Jew ambas­sador, watch out where you tread! Let’s dis­cuss the Holo­caust, let’s talk about all the fairy tales about Auschwitz and Dachau.“[6] Makis Voridis, a mem­ber of the LAOS Party and min­is­ter of trans­porta­tion in the Greek gov­ern­ment, imposed by Berlin and Brus­sels, began his polit­i­cal career as the leader of a youth orga­ni­za­tion of the party presided over by Geor­gios Papadopou­los. Papadopou­los had been the mil­i­tary com­man­der of the junta. He founded that party after he had been released from prison, in the after­math of the over­throw of his dic­ta­tor­ship. The Ger­man gov­ern­ment evi­dently con­sid­ers the LAOS Party help­ful for imple­ment­ing its aus­ter­ity dictate. . . .

COMMENT: As Greece is being sub­jected to sys­tem­atic eco­nomic exploita­tion and loot­ing, withno effec­tive par­tic­i­pa­tion by the Greek cit­i­zenry, it is impor­tant to remem­ber that their prob­lems stem, in part, from the long term Ger­man pol­icy of avoid­ing repa­ra­tions for the wealth they stole dur­ing their occu­pa­tion of Greece.

The pur­loined Greek cap­i­tal, like that of many other Nazi vic­tims, has not been repaid.

Fol­low­ing a deci­sion made in August of 1944, the Third Reich trans­ferred its vast assets and secreted the wealth into 750 front com­pa­nies in neu­tral coun­tries, where it formed the foun­da­tion of the Bor­mann net­work. That net­work, in turn, admin­is­ters “cor­po­rate Germany”–the Ger­man “core cor­po­ra­tions” and their asso­ci­ated finan­cial institutions.

It is also worth not­ing that the Nazis loss on the bat­tle­field has been reversed dur­ing the post­war. Ger­many lost the war, but won the postwar.

An impor­tant, inci­sive arti­cle from german-foreign-policy.com (which feeds along the bot­tom of the front page of this web­site) notes the extent of the eco­nomic dam­age done to Greece dur­ing both World War II and the post-war, to date.

Note the skilled, decades-long maneu­ver­ing by Ger­many to cir­cum­vent repay­ing wealth looted from Greece and other nations.

Last night, under strong pop­u­lar protests, the Greek par­lia­ment accepted the lat­est “aus­ter­ity pack­age,” that the Ger­man gov­ern­ment had pro­moted in the form of an ulti­ma­tum. This “aus­ter­ity pack­age” will lead to a 20 per­cent cut in pri­vate rev­enue and the min­i­mum wage, there­fore also in the pub­lic sec­tor wages, which are depen­dent on the min­i­mum wage. One hun­dred fifty thou­sand gov­ern­ment employ­ees will be laid off. Crit­i­cism of Berlin has become sharper because of its efforts to trans­form Athens into a de facto EU finance pro­tec­torate, using so-called aus­ter­ity com­mis­sion­ers. Demon­stra­tors burned Ger­man flags; Greek par­lia­men­tar­i­ans have announced an ini­tia­tive to remind that Ger­man World War II repa­ra­tions are still out­stand­ing. Since 1945, the Fed­eral Repub­lic of Ger­many has con­sis­tently refused not only to pay repa­ra­tions, but also Nazi debts, even those undis­puted by the Ger­man Reichs­bank at the end of the war. These would amount to more than three bil­lion Euros today. But, the debate con­tin­ues in the Ger­man cap­i­tal about the sus­pen­sion of democ­racy in Greece.

Protests against Berlin
Berlin’s bru­tal aus­ter­ity dic­tate and the Ger­man media’s on-going rabble-rousing anti-Greek (“bank­rupt Greeks”) pro­pa­ganda has enflamed Greek protests against Ger­many for quite some time. Last sum­mer, Greek demon­stra­tors chanted “Ger­many out of the EU!”, and dis­played “Merkel = Nazi” ban­ners at ral­lies. EU flags with a swastika in the cen­ter were occa­sion­ally seen. The mem­ory that this is not the first time that Berlin has dic­tated Athens’s poli­cies, has recently been accom­pa­nied by ref­er­ences to Nazi rule in occu­pied Europe. Last week demon­stra­tors out­side of the Greek par­lia­men­tary build­ing again chanted “Nazis Out!” while burn­ing a Ger­man flag. Trade union­ists also occu­pied the Athen­ian offices used by the Ger­man Horst Reichen­bach and his “task force Greece,” mon­i­tor­ing Athens’s aus­ter­ity mea­sures, in the name of the EU Com­mis­sion. These protests against Berlin’s hege­monic dic­tate are defamed in the Ger­man media sim­ply as “anti-German propaganda.”

Old Debts
A few days ago, a group of twenty-eight Greek par­lia­men­tar­i­ans, from var­i­ous par­ties, reacted to Berlin’s per­sis­tent pres­sure by tabling a res­o­lu­tion, call­ing on the par­lia­ment to debate Nazi Germany’s plun­der of Greece, which has never received indem­ni­ties. The indem­ni­ties not only refer to repa­ra­tions in gen­eral, but also to the com­pul­sory loans to the Reichsbank’s clear­ing account. Shortly before the end of World War II, Nazi bankers were still in pos­ses­sion of Greek assets worth 476 mil­lion Reichs­mark, which has never been repaid by the Fed­eral Repub­lic of Ger­many. Accord­ing to experts, this would today amount to 3.4 bil­lion Euros with inter­ests included. Greece is not the only coun­try that has waived Germany’s old Nazi debts with­out receiv­ing any­thing in return. As the econ­o­mist Albrecht Ritschl, who teaches at the Lon­don School of Eco­nom­ics, con­firmed, Nazi Germany’s unpaid debts to its wartime adver­saries would today range between 700 bil­lion and 1.4 tril­lion Euros with inter­ests included, depend­ing on the method of calculation.[1] This does not even include the repa­ra­tions for war damages.

Debt Can­ce­la­tion
Because of the Fed­eral Repub­lic of Germany’s long­stand­ing pol­icy of refusal, even totally indis­putable Nazi debts have never been paid. Bonn scored a deci­sive suc­cess in 1953 with the so-called Lon­don Debt Agree­ment, achiev­ing a gigan­tic debt can­ce­la­tion, in the frame­work of which Greece also waived its for­mer occupier’s enor­mous debts. That agree­ment per­mit­ted the Fed­eral Repub­lic of Ger­many the expunc­tion of enor­mous debts, cre­ated both before and since World War II. The agree­ment also stip­u­lated that the ques­tion of the pay­ment of Nazi debts and repa­ra­tions would first be solved with a peace treaty con­cluded with a “reunited” Ger­many. [The Fed­eral Repub­lic of] “Ger­many has been in a very good posi­tion ever since, even as other Euro­peans were forced to endure the bur­dens of World War II and the con­se­quences of the Ger­man occu­pa­tion,” says the econ­o­mist Ritschl. This has made the resur­gence of the “great­est debt trans­gres­sor of the 20th Cen­tury,” namely, Ger­many, possible.[2] . . . .

COMMENT: Just how acute is the sit­u­a­tion in Greece? So bad that phys­i­cal edu­ca­tion teach­ers are excus­ing chil­dren from par­tic­i­pat­ing due to the fact that mal­nu­tri­tion pre­vents them from exer­cis­ing with­out becom­ing dizzy. These chil­dren may very well expe­ri­ence long-term effects from their “aus­tere” diet.

This is a text­book exam­ple of pol­i­tics as the con­tin­u­a­tion of war by “other means”–applied von Clausewitz.

EXCERPT . . . It has been a com­mon secret among PE teach­ers for some time now that they don’t expect pupils to do PE any more, because many of them are under­fed and get dizzy. . . .

COMMENT: The details of the agree­ment to which the Greeks are being sub­jected might be politely described as stun­ning. The coun­try is being used as a vehi­cle for shoring up weak­ened Euro­pean financial institutions!

Ear­lier today, we learned the first stun­ner of the Greek “bailout pack­age”, which cour­tesy of some con­vo­luted trans­mis­sion mech­a­nisms would result in some, poten­tially quite many, Greek work­ers actu­ally pay­ing to retain their jobs: i.e., neg­a­tive salaries. Now, hav­ing looked at the Eurogroup’s state­ment on the Greek bailout, we find another very cre­ative use of “neg­a­tive” num­bers. And by cre­ative we mean absolutely shock­ing and scan­dalous. First, as a reminder, even before the cur­rent bailout mech­a­nism was in place, Greece barely saw 20% of any actual fund­ing, with the bulk of the money going to Euro­pean and Greek banks (of which the for­mer ulti­mately also ended up fund­ing the ECB and thus Euro­pean banks). Fur­ther­more, we already know that as part of the lat­est set of con­di­tions of the sec­ond Greek bailout, an’ ‘Escrow Account” would be estab­lished: this is sim­ply a means for Greek cred­i­tors to have a senior claims over any “bailout” cash that is actu­ally dis­bursed for things such as, you know, a Greek bailout, where the money actu­ally trick­les down where it is most needed — the Greek cit­i­zens. Here is where it just got sur­real. It turns out that not only will Greece not see a sin­gle penny from the Sec­ond Greek bailout, whose entire Use of Pro­ceeds will be lim­ited to fund­ing debt inter­est and matu­rity pay­ments, but the coun­try will actu­ally have to fund said escrow! You read that right: the Greek bailout #2 is noth­ing but a Greek-funded bailout of Europe’s insol­vent banks... and the Greek con­sti­tu­tion is about to be changed to reflect this! . . .

COMMENT: The Euro­pean Mon­e­tary Union is, as we have seen in many pro­grams and arti­cles, the real­iza­tion of the strat­a­gem of Pan-German the­o­reti­cian Friedrich List.

Writ­ing in 1943, Paul Win­kler fore­saw that Ger­many would real­ize its goals through the cre­ation and dom­i­na­tion of a German-dominated cen­tral Euro­pean eco­nomic union (bear­ing a strik­ing resem­blance to today’s Euro­pean Mon­e­tary Union.) One of the prin­ci­pal influ­ences on List’s think­ing was the “con­ti­nen­tal” con­cept of Napoleon, who attempted to eco­nom­i­cally unite Europe under French influence.

“Charles Andler, a French author, summed up cer­tain ideas of List in his work, The Ori­gins of Pan-Germanism, (pub­lished in 1915.) ‘It is nec­es­sary to orga­nize con­ti­nen­tal Europe against Eng­land. Napoleon I, a great strate­gist, also knew the meth­ods of eco­nomic hege­mony. His con­ti­nen­tal sys­tem, which met with oppo­si­tion even from coun­tries which might have prof­ited from such an arrange­ment should be revived, but, this time, not as an instru­ment of Napoleonic dom­i­na­tion. The idea of united Europe in a closed trade bloc is no longer shock­ing if Ger­many assumes dom­i­na­tion over such a bloc—and not France. [Empha­sis added.] Bel­gium, Hol­land, Switzer­land, will­ingly or by force, will enter this ‘Cus­toms Fed­er­a­tion.’ Aus­tria is assumed to be won over at the out­set. Even France, if she gets rid of her notions of mil­i­tary con­quest, will not be excluded. The first steps the Con­fed­er­a­tion would take to assure unity of thought and action would be to estab­lish a joint rep­re­sen­ta­tive body, as well as to orga­nize a com­mon fleet. But of course, both the head­quar­ters of the Fed­er­a­tion and its par­lia­men­tary seat would be in Ger­many. [Empha­sis added.]”

COMMENT: The Lis­t­ian model was put into effect by the Third Reich, as can be gleaned by read­ing Dorothy Thompson’s analy­sis of Germany’s plans for world dom­inane by a cen­trail­zed Euro­pean eco­nomic union. Ms. Thomp­son was writ­ing in The New York Her­ald Tri­buneon May 31, 1940! Her com­ments are repro­duced by author T. H. Tetens.

. . . . The Ger­mans have a clear plan of what they intend to do in case of vic­tory. I believe that I know the essen­tial details of that plan. I have heard it from a suf­fi­cient num­ber of impor­tant Ger­mans to credit its authen­tic­ity . . . Germany’s plan is to make a cus­toms union of Europe, with com­plete finan­cial and eco­nomic con­trol cen­tered in Berlin. This will cre­ate at once the largest free trade area and the largest planned econ­omy in the world. In West­ern Europe alone . . . there will be an eco­nomic unity of 400 mil­lion per­sons . . . To these will be added the resources of the British, French, Dutch and Bel­gian empires. These will be pooled in the name of Europa Germanica . . .

“The Ger­mans count upon polit­i­cal power fol­low­ing eco­nomic power, and not vice versa. Ter­ri­to­r­ial changes do not con­cern them, because there will be no ‘France’ or ‘Eng­land,’ except as lan­guage groups. Lit­tle imme­di­ate con­cern is felt regard­ing polit­i­cal orga­ni­za­tions . . . . No nation will have the con­trol of its own finan­cial or eco­nomic sys­tem or of its cus­toms. [Empha­sis added.] The Naz­i­fi­ca­tion of all coun­tries will be accom­plished by eco­nomic pres­sure. In all coun­tries, con­tacts have been estab­lished long ago with sym­pa­thetic busi­ness­men and indus­tri­al­ists . . . . As far as the United States is con­cerned, the plan­ners of the World Ger­man­ica laugh off the idea of any armed inva­sion. They say that it will be com­pletely unnec­es­sary to take mil­i­tary action against the United States to force it to play ball with this sys­tem. . . . Here, as in every other coun­try, they have estab­lished rela­tions with numer­ous indus­tries and com­mer­cial orga­ni­za­tions, to whom they will offer advan­tages in co-operation with Germany. . . .

Discussion

25 comments for “Von Clausewitz, List, the Bormann Capital Network and the Subjugation of Europe”

@ Dave: It is a ter­rific resume of the sit­u­a­tion. Have you ever thought about writ­ing a book? You got one right here. Per­son­ally, I never miss an occa­sion on my blog to pub­lish con­tent, videos, arti­cles, any­thing that encour­ages Euro­peans and Euro­pean coun­tries to think in terms of nation-states instead of “Europe”. Some might think that I go too far on the side of nation­al­ism but I pre­fer that to the pas­sive sub­mis­sion to the Euro­pean Union and its insti­tu­tions, which is noth­ing less than the killing of a whole cul­ture and of a dozen peo­ples and/or nation­al­i­ties. And all this becomes pos­si­ble because peo­ple don’t see sol­diers with nazi uni­forms walk­ing down the streets. Hav­ing a low capac­ity to detect gam­bits where they are, they buy into the decep­tion. Charles Andler and Dorothy Thomp­son were right. If you know how to do it cor­rectly, sol­diers are no longer necessary.

Here’s a great video that describes in under 10 min­utes the lunacy of what’s going on in the euro­zone and how the it’s being con­verted into a giant vin­dic­tive debtors prison designed to pro­tect the banks and impov­er­ish the public.

Not that it’s sur­pris­ing at this point, but note that one of the most urgent reforms demands by Greece’s new over­lords is a 1.1 bil­lion euro reduc­tion in state spend­ing on phar­ma­ceu­ti­cals. Nice pri­or­i­ties:

Euro­pean cred­i­tor coun­tries are demand­ing 38 spe­cific changes in Greek tax, spend­ing and wage poli­cies by the end of this month and have laid out extra reforms that amount to micro­manag­ing the country’s gov­ern­ment for two years, accord­ing to doc­u­ments obtained by the Finan­cial Times.

The reforms, spelt out in three sep­a­rate mem­o­randa of a com­bined 90 pages, are the price that Greece has agreed to pay to obtain a 130 bil­lion euros sec­ond bail-out and avoid a sov­er­eign default that the gov­ern­ment feared would throw Greek soci­ety into turmoil.

They range from the sweep­ing – over­haul­ing judi­cial pro­ce­dures, cen­tral­is­ing health insur­ance, com­plet­ing an accu­rate land reg­istry – to the mun­dane – buy­ing a new com­puter sys­tem for tax col­lec­tors, chang­ing the way drugs are pre­scribed and set­ting min­i­mum crude oil stocks.

“The pro­gram is much, much more ambi­tious than eco­nomic reform,” said Mujtaba Rah­man, Europe ana­lyst at the Eura­sia Group risk con­sul­tancy. “This is state build­ing, as typ­i­cally under­stood in tra­di­tional low-income contexts.”

Most urgency is attached to a 10-page list of “prior actions” that must be com­pleted by Wednes­day in order for euro zone finance min­is­ters to give a final sign-off to the new bail-out at an emer­gency meet­ing sched­uled for Thursday.

The 38 mea­sures are a mix of laws that must be passed by par­lia­ment, min­is­te­r­ial deci­sions and pres­i­den­tial decrees that affect a com­plete cross-section of Greek eco­nomic activ­ity, from health spend­ing to munic­i­pal admin­is­tra­tion to tax collection.

Only a hand­ful of the mea­sures are listed as passed or in the process of being imple­mented, includ­ing a highly pub­li­cised 300 mil­lion euros in pen­sion reduc­tions and 325 mil­lion euros in other spend­ing cuts. The other reforms are grouped under six cat­e­gories, though most of the changes fall under spend­ing cuts, bank reg­u­la­tions, and eco­nomic reforms.

Among the mea­sures that must be com­pleted in the next seven days are reduc­ing state spend­ing on phar­ma­ceu­ti­cals by 1.1 bil­lion euros; com­plet­ing 75 full-scale audits and 225 value added tax audits of large tax­pay­ers; and lib­er­al­is­ing pro­fes­sions such as beauty salons, tour guides and diet centres.

...

Sim­i­larly, a delay in reforms of health­care pro­cure­ment, which are opposed by doc­tors, med­ical sup­pli­ers and hos­pi­tal man­agers, meant that sav­ings of only 500 mil­lion euros were achieved in 2011 against a tar­get of 1 bil­lion euros, leav­ing the miss­ing amount to be col­lected this year.

Mr Rah­man said the scale and the speed of the reforms demanded raised ques­tions about whether scep­ti­cal euro zone lenders were set­ting up Greece to fail some­time within the next year.

“Even if one under­stands the polit­i­cal imper­a­tive, the pro­gram is being set up to fail as many of the tar­gets will be impos­si­ble to achieve,” he said.

The imag­ined spec­ta­cle of auc­tion­ing off the Parthenon may or may not take place but what is hap­pen­ing less dra­mat­i­cally in Greece is the loss of pri­vate prop­erty by the mid­dle class. That process of grind­ing attri­tion doesn’t make the news.

The uni­fi­ca­tion and homog­e­niza­tion of cus­toms was a pri­mary method of Ger­man uni­fi­ca­tion in the 19th cen­tury. In enforc­ing that, a sub­tle kind of mar­tial law was imposed that cre­ated mod­ern Ger­many. That tem­plate worked well inside Ger­many and now out­side as well. Empire by bureau­cratic and eco­nomic encroach­ment is suc­ceed­ing for the Reich.

The CS Mon­i­tor has an inter­est­ing pair of pieces that attempt to sum­ma­rize the pro-austerity and anti-austerity argu­ments. They’re both worth a read. And if the pro-austerity sum­mary is accu­rate, Europe is pretty screwed because it’s look­ing more and more like Berlin con­sen­sus is increas­ingly look­ing like the GOP-style mag­i­cal think­ing that gut­ted the US’s econ­omy: They have an ide­o­log­i­cal cer­tainty that national divest­ment and gut­ting of the safety-net will def­i­nitely work (given enough time), it’s the only option for clos­ing the “com­pet­i­tive­ness” gap, and they’re get­ting tired of all the complaints.

The pro-austerity argu­ments assume that max­i­miz­ing dig­its in a few selected bank accounts, while ignor­ing human tragedy, is a valid goal. In any sane prim­i­tive tribe fac­ing a harsh win­ter, aus­ter­ity would mean hold­ing all one’s assets very close and shar­ing them equally among one’s own. The Greeks just agreed to what amounts to a par­tial default, even if no one is call­ing it that. They should default com­pletely and right away, restore their own cur­rency and severely restrict for­eign own­er­ship and cap­i­tal flight. Any­thing else they can think of that makes a Frank­fort or Paris banker scream is auto­mat­i­cally the right thing to do.
Of course, if all that hap­pened, NATO would ‘lib­er­ate’ them.

@Dwight: Yeah, the aus­ter­ity argu­ments are like a school teacher deal­ing with poorly per­form­ing stu­dents. Approaches like extra home­work, tutor­ing, and address­ing mal­nu­tri­tion at home are con­sid­ered unac­cept­ably “soft”. Instead, the teacher resorts to pub­lic humil­i­a­tion, beat­ings with a rod AND, just to show the teacher is seri­ous, con­fis­ca­tion of the text­books with the lin­ger­ing threat of paper and pen­cil con­fis­ca­tion if the stu­dent doesn’t improve within a semes­ter. I guess there’s maybe 0.1% or so of the pop­u­lace that might actu­ally improve aca­d­e­m­i­cally after such treat­ment, but gen­er­ally speak­ing that teacher should be fired because they are destroy­ing those children’s futures.

Chancellor’s dra­matic move to cut top rate of income tax in next week’s bud­get will delight the Con­ser­v­a­tive right
Patrick Win­tour, polit­i­cal edi­tor
guardian.co.uk, Thurs­day 15 March 2012 17.30 EDT

George Osborne is poised to slash the top rate of income tax from 50p to 40p in next week’s bud­get in a dra­matic move that will delight busi­ness and the Tory right, but risks rein­forc­ing the Con­ser­v­a­tives’ rep­u­ta­tion as pro­tec­tors of the super-rich.

With the four senior min­is­ters in the bud­get dis­cus­sions due to speak on Fri­day and a final meet­ing sched­uled for Mon­day, the Lib­eral Democ­rats appear to recog­nise that they are not going to be able to block what is Osborne’s key demand for the bud­get, but are try­ing to max­imise the con­ces­sions they can extract in return.

Gov­ern­ment sources say that from the out­set the chan­cel­lor has seen a cut in the 50p rate as the headline-grabbing mea­sure of the bud­get, and views it as the sim­plest sin­gle step he can take to show his com­mit­ment to an enter­prise economy.

...

It is under­stood that the drive to cut the top rate is com­ing from Osborne as much as David Cameron. The chan­cel­lor has, sources say, been intel­lec­tu­ally per­suaded of the case for a cut in the top rate, a move that will endear him to the Tory right.

A gov­ern­ment source said: “The bud­get has to strike a bal­ance. It has to show we are all in this together, but it also has to show that as a coun­try we are open for busi­ness. We want a top rate that does not put off entre­pre­neurs or busi­nesses. It is one of the high­est top rates world­wide at a time when we need real growth. Above all, real growth is what we need to pro­mote wealth and pros­per­ity.” The source said the deal on the 50p was not yet done and dusted, but was close to being so.

They belong to what has become the go-to SWAT team in finan­cial crises. Their employer, Black­Rock, may be lit­tle known out­side finan­cial cir­cles even as it man­ages a world-leading $3.51 tril­lion of assets, but the firm is exert­ing enor­mous influ­ence as a behind-the-scenes adviser to trou­bled gov­ern­ments around the globe.

In Greece, Black­Rock is help­ing deter­mine just how much cap­i­tal the country’s banks will need to raise in the com­ing months. It is a cru­cial step as Greece tries to fix its bank­ing indus­try and its broader econ­omy, but the task is a risky one.

Set the cap­i­tal lev­els too low and finan­cial firms may not have an ade­quate cush­ion to with­stand fur­ther losses. Set the bar too high and the banks may strug­gle to find investors will­ing to come up with the money. In either sit­u­a­tion, the gov­ern­ment could be forced to step in

Black­Rock knows the stakes. Along with Greece, the finan­cial firm has advised the Irish gov­ern­ment and the British Trea­sury. In Ire­land, BlackRock’s find­ings formed the basis of a bank’s effort to raise an addi­tional $34 bil­lion. The United States Trea­sury hired Black­Rock dur­ing the 2008 finan­cial cri­sis to help value real estate and other assets the gov­ern­ment was acquir­ing as it stepped in to bail out tee­ter­ing finan­cial firms like the Amer­i­can Inter­na­tional Group.

The exec­u­tive who leads these efforts, Craig Phillips, keeps a poster of the movie “The Exor­cist” in his office, say­ing that he sees his job as help­ing gov­ern­ments and com­pa­nies con­front their prob­lems. “We have been con­di­tioned to be ultra­respon­sive,” he said.

The appeal of Black­Rock is that it has the size, sys­tems and exper­tise to scour and ana­lyze huge vol­umes of finan­cial data quickly. In Greece, for exam­ple, it reviewed 10 mil­lion loans in about three months. Another attrac­tion is that unlike other finan­cial firms — say, Gold­man Sachs — Black­Rock is not known for mak­ing splashy bets that can land it in the head­lines. It has largely flown beneath the public’s radar.

Yet Black­Rock is no stranger to con­tro­versy. In the United States, the firm — which makes most of its prof­its by man­ag­ing money for investors, pen­sion funds, endow­ments and other insti­tu­tions — has been crit­i­cized for buy­ing and sell­ing some of the same secu­ri­ties that its Black­Rock Solu­tions unit is valu­ing for the gov­ern­ment. Few firms have such access to a vast amount of market-moving infor­ma­tion, and that, some crit­ics say, presents a poten­tial con­flict of inter­est.

“Imag­ine you con­sult with Greece and you see the inside issues and you real­ize with greater cer­tainty it’s going to go a cer­tain way,” said Robert Jar­row, a pro­fes­sor of finance at Cor­nell Uni­ver­sity. “How could you not make invest­ment deci­sions based on that?”

Eye­brows were raised in Greece when the firm was approached to han­dle loan val­u­a­tion work for a friendly merger in Greece between two banks it had just reviewed. Black­Rock said it hadn’t made a deci­sion on whether to accept this assign­ment. Mr. Phillips added that the com­pany had inter­nal guide­lines, which are in place to “man­age actual and per­ceived con­flicts of interest.”

...

To help sta­bi­lize the sys­tem, the Bank of Greece looked for a firm to review the loan port­fo­lios of 18 finan­cial firms. Bank of Greece asked Black­Rock and three other firms, Black­stone, Oliver Wyman and Alvarez & Marsal, to sub­mit a pro­posal on how each would go about valu­ing the portfolios.

...

In a city at times rocked by vio­lent protests, Black­Rock sought a low pro­file. Employ­ees were not allowed to carry or wear any­thing bear­ing the com­pany logo. The firm hired 18 armed secu­rity guards to trans­port employ­ees in vans or, in rare cases, on motor­cy­cles. Black­Rock even had a code name: Solar, lead­ing some ten­ants in its office build­ing to think the team was a solar energy company.

As part of the assign­ment, Black­Rock gath­ered infor­ma­tion on mil­lions of loans and used the data to cre­ate a view of the loss poten­tial on the port­fo­lios. The banks set up data rooms for Black­Rock and uploaded infor­ma­tion, allow­ing the firm to see things like col­lat­eral and pay­ment history.

Black­Rock and the banks butted heads on some issues. For instance, Black­Rock wanted to write all loans backed by third-party guar­an­tees to zero, since they were riskier than those backed by collateral.The banks resisted, but “in the end there was no room for debate,” said George Aro­nis, also of Alpha Bank. The loans were writ­ten down to zero.

Jes­sica Tan and Charles Hatami, two of BlackRock’s day-to-day man­agers in Greece, said that they were sur­prised by both the qual­ity of the data and the results. Most insti­tu­tions, they said, did not lend reck­lessly, as the United States banks did dur­ing the real estate boom.

“The con­sumer lend­ing mar­ket is rel­a­tively new in Greece, and they were dis­ci­plined in their approach,” Mr. Phillips of Black­Rock said. “Unlike other coun­tries, the Greek con­sumer is not debt laden.”

Maria Mavri­dou, alter­nate direc­tor of finan­cial sta­bil­ity at the Bank of Greece, said that BlackRock’s find­ings were likely to be released in the com­ing weeks by the gov­ern­ment. The report will describe the cur­rent state of the Greek bank­ing sys­tem and out­line addi­tional cap­i­tal requirements.

“They didn’t know any­thing about Greece, but they sure know data and what to do with it,” she said.
a

At a din­ner in Madrid ear­lier this month, the main com­plaint about Mar­i­ano Rajoy was that the new prime min­is­ter was treat­ing the elec­torate like chil­dren. Many of the guests, sup­port­ers of Rajoy’s Pop­u­lar Party (PP), under­stood that Spain had to cut its fis­cal deficit and restore its com­pet­i­tive­ness. But they didn’t like the fact that the prime min­is­ter hadn’t been frank about his plans.

In advance of last November’s gen­eral elec­tion, Rajoy said he wouldn’t raise taxes, make it cheaper to fire peo­ple or cut the wel­fare state. But he has now done the first two. After this week’s elec­tion in Andalu­sia, Spain’s largest region, he is expected to do the last.

Rajoy’s camp doesn’t see any prob­lem in fail­ing to be upfront. It would have been fool­ish to talk too much about aus­ter­ity in the gen­eral elec­tion cam­paign as that might have fright­ened the vot­ers. For the same rea­son, it would be fool­ish to tell them about reform­ing the wel­fare state in advance of the Andalu­sia election.

In the long run, the fail­ure to treat the pop­u­la­tion like adults could cause trou­ble. But in the short run, the strat­egy has paid off. The social­ist party lost nearly 40 per­cent of its votes in the gen­eral elec­tion, not least because it had done a poor job in gov­ern­ment. It is now expected to lose con­trol of Andalu­sia, its last main bas­tion, accord­ing to an opin­ion poll by Metroscopia.

Rajoy has already used the absence of any seri­ous oppo­si­tion – even a gen­eral strike called for next week doesn’t pose much threat – to push through one batch of reforms. The most impor­tant is of the labour mar­ket. He has made it cheaper for com­pa­nies to fire peo­ple and largely dis­man­tled the nation­wide sys­tem of col­lec­tive bar­gain­ing. The net effect will be that wages, which rose rapidly dur­ing the early years of the sin­gle cur­rency, will fall – so restor­ing Spain’s competitiveness.

...

This won’t mat­ter if the econ­omy, which the gov­ern­ment expects to shrink 1.7 per­cent this year, sta­bilises next year. But what if GDP keeps shrink­ing, unem­ploy­ment (now 23 per­cent) con­tin­ues ris­ing and the deficit remains stub­bornly high? Spain would face renewed bond mar­ket jit­ters and fur­ther pres­sure from its euro part­ners to cut its deficit. Rajoy would then have to sell another dose of aus­ter­ity to vot­ers that wouldn’t believe him. Hav­ing treated them like kids, they might even throw a tantrum.

Euro­pean Union lead­ers showed “moral decay” in delay­ing Greece’s bond swap deal in order to min­i­mize the impact on the region’s banks, accord­ing to High Fre­quency Eco­nom­ics’ founder and chief econ­o­mist, Carl Weinberg.

In a March report on the global econ­omy, Wein­berg said EU lead­ers had delib­er­ately delayed Greece’s restruc­tur­ing, to the detri­ment of its econ­omy, in order to give banks time to pre­pare for the hit on their debt hold­ings.

“Why wasn’t Greece allowed to restruc­ture its debt two years ago, before its econ­omy con­tracted by 15 per­cent, and before it was nec­es­sary to impose a hair­cut on pri­vate sec­tor bor­row­ers, desta­bi­lize the gov­ern­ment and the econ­omy, ille­gally imple­ment retroac­tive col­lec­tive action clauses, and trig­ger credit default swaps?” he asked in the report.

“It was incon­ve­nient for the banks, that is why,” he said.

Wein­berg added that EU lead­ers forced Greece to go through severe aus­ter­ity mea­sures in order to give banks time to deal with the debt.

“Politi­cians pre­ferred to put a few mil­lion Greek cit­i­zens through the ringer than ask banks to swal­low losses on gov­ern­ment bonds before they had time to ‘pre­pare’… it would seem that it is not just bankers who have entered an era of moral decay, but the gov­ern­ments that want to reg­u­late them as well,” he wrote.

...

Of course, for moral “decay” to take place it assumes a given bankster/politician/associated min­ion would have been unwill­ing to impov­er­ish their fel­low cit­i­zens before the finan­cial cri­sis and weren’t just wait­ing for the right cri­sisoppor­tu­nity to right all the wrongs that emerged over the few cen­turies (like a middle-class, non-junk eco­nomic the­o­ries, demo­c­ra­tic ideals, etc....). There are some indi­vid­u­als push­ing mass aus­ter­ity that seem like they might have expe­ri­enced their moral decay a while ago.

Here’s one more arti­cle about how a cri­sis in euro­zone cri­sis isn’t just a cri­sis. It’s a fea­ture. The fact that the his­tor­i­cally low inter­est rates and other var­i­ous stim­u­lus mea­sures taken by the ECB are actu­ally help­ing Ger­man firms more than P.I.I.G.S. cor­po­ra­tions also high­lights another inter­est­ing char­ac­ter­is­tic of euro­zone econ­omy: The “inter­nal deval­u­a­tion” of the P.I.I.G.S.‘s economies that the Bun­des­bank is con­tin­u­ally demand­ing isn’t sim­ply over con­cerns about “com­pet­i­tive­ness” and deficits (as BS-filled as those con­cerns may be). The jaw-boning about “com­pet­i­tive­ness” and the demand that the weaker euro­zone economies slash their stan­dards of liv­ing and send their economies into a tail­spin is also about infla­tion. The Bun­des­bank is demand­ing basi­cally min­i­mal infla­tion and if you want sus­tained finan­cial stim­u­lus (like ultra low bor­row­ing rates for cor­po­ra­tions and tril­lions of euros in ECB asset pur­chases) and basi­cally no infla­tion, you’re going to have to “inter­nally devalue” a chunk of your econ­omy. If you think of the euro­zone mem­bers nations as com­part­men­tal­ized “chunks” of the large euro­zone ecosys­tem, what we’re see­ing is a net over­all stim­u­lus for the euro­zone because the stim­u­lus poli­cies aren’t tar­get­ting the eco­nom­ices in cri­sis but instead the entire euro­zone, and in order to hold down over­all infla­tion for the euro­zone as a whole the weaker nations are being tar­get­ted for mas­sive defla­tion­ary poli­cies to act as a sort of “infla­tion buffer” for the larger euro­zone econ­omy. It’s a feature.

PIMCO’s El-Erian: A Global Realign­ment Our Grand­chil­dren Will Talk About
Investors must absorb mar­ket blows, be agile enough to react quickly
By John Sul­li­van, Advisorone

May 4, 2012

...

“Europe under­stands this list now, but the imple­men­ta­tion of its com­po­nents lags,” El-Erian said. “It went from sta­ble to ‘bimodal’ with fat tails. What will Europe be in a year? There is a high prob­a­bil­ity there will be a re-founding of Europe using the West and East Ger­many as a model. There is a lower prob­a­bil­ity it will frag­ment. If that hap­pens it will be a total mess for Europe and the world. But it will tip one way or another and either way will be bumpy.”

The United States is a house in their neigh­bor­hood, and there­fore Amer­i­cans should be con­cerned, he continued.

“Ger­many needs a part­ner, which is one rea­son you see a Ger­man chan­cel­lor actively cam­paign­ing for a French pres­i­dent. That is very unusual but they have a good rela­tion­ship; basi­cally, Merkel makes the deci­sions and Sarkozy explains them to the world,” he quipped to laugh­ter from the audi­ence.

As far as the fourth point, the par­al­lels between Europe and the rest of the world are:

The robust­ness of the U.S. econ­omy is fac­ing struc­tural imped­i­ments to growth
The U.S. pol­icy response from the Fed is “tac­ti­cally smart” but strate­gi­cally short-sighted
There is a large and grow­ing depen­dency on poli­cies that fun­da­men­tally change the func­tion­ing of the mar­kets Outer coun­tries in many other parts of the world are not will­ing to move to the cen­ter
There is a ques­tion of how the global eco­nomic sys­tem will evolve from here.

He con­cluded with the impli­ca­tions for invest­ing, which he called the “Great Escape.”

“In the short term, investors must escape the world of delever­ag­ing. They must stay in the game as oth­ers try to pick their pock­ets in the market.”

Com­par­ing investors to Muham­mad Ali’s strat­egy for beat­ing George Fore­man in the “Rum­ble in the Jun­gle,” he said investors must be able to absorb mar­ket blows and be agile enough to react quickly.

“We are liv­ing in a global realign­ment that our chil­dren and grand­chil­dren will be talk­ing about. We can’t see it, because we are so close to it, but make no mis­take, it’s there.”

Ok, first off, which are the “Outer” coun­tries of the world that are not will­ing to “move to the cen­ter”. Is this North Korean “out­er­ness” or Ice­landic “out­er­ness” because those are two very “outer” coun­tries in the world?

And sec­ondly, what exactly is the “West and East Ger­many” model sup­posed to look like when applied to the euro­zone? I mean, I under­stand that there’s going to be a wave of pri­va­ti­za­tions of state assets like with what hap­pened dur­ing the Ger­man reuni­fi­ca­tion. But what about the other side of the coin:

Study shows high cost of Ger­man reuni­fi­ca­tion: report

BERLIN | Sat Nov 7, 2009 11:30am EST

(Reuters) — As Ger­many pre­pares to cel­e­brate the 20th anniver­sary of the fall of the Berlin Wall, a new study shows that some 1.3 tril­lion euros ($1.9 tril­lion) have been trans­ferred from the west to rebuild the east, a news­pa­per reported on Saturday.

The report by the Halle-based IWH research insti­tute showed the net trans­fers from west to east — a sum equiv­a­lent to over half Germany’s total eco­nomic out­put in 2008 — had “risen sig­nif­i­cantly” in the past decade, weekly Welt am Son­ntag said.

Mon­day will be the 20th anniver­sary of the fall of the Wall, which the once-divided city will mark by top­pling 1,000 brightly col­ored domi­noes that were being erected on Sat­ur­day along a 1.5 kilo­me­ter stretch of the Cold War barrier’s orig­i­nal path.

The east has cast off many shack­les from its Com­mu­nist past, thanks partly to the trans­fers, but unem­ploy­ment remains nearly dou­ble that of the west and econ­o­mists say it is still years away from catch­ing up with the richer part of the country.

...

So where are the tril­lions of euros in state aid? Is that sup­posed to be a sur­prise gift after the P.I.I.G.S. act like good lit­tle plebes or is the Ger­man reuni­fi­ca­tion model per­haps not the best ana­log for this his­toric global realignment?

So many awful ques­tions and only awful answers. At least future gen­er­a­tions will get to share in the long-term awful­ness after this crop of humans is done build­ing a global gulag of cor­po­rate rule and knee-capped gov­ern­ments every­where global realign­ment, so there’s that. And shar­ing is a good thing, right?

@Pterrafractyl
I was just catch­ing up with some of your posts and I couldn’t let it go with­out men­tion, as I have done in the past, that I work for a com­pany owned in part by Bain Capital...the other part is owned by Black­stone! This very direct con­nec­tion between Rom­ney and the aus­ter­ity cler­ics cur­rently pil­lag­ing Europe should come as no sur­prise, and yet, I am struck nearly dumb at the final real­iza­tion that my livelihood—such as it is—contributes even a small morsel to their despi­ca­ble enterprise.

I must find a new job. Until then, I’m a mole, I’m a mole. Or maybe a can­cer within a cancer.

@GrumpusRex: Any inside infor­ma­tion that you have, my friend, might prove to be use­ful. If you see, read or hear some­thing you think may even be remotely impor­tant, might not be a bad idea to keep in touch, IMO. =)

@Grumpusrex: Heh, don’t beat your­self up too much. I think at this point you damn near have to engage in barter to truly avoid enabling an oli­garch. Non-oligarch-owned busi­ness are hand­ing plenty of prof­its over the oli­garchs. It’s an inevitabil­ity woven into the fab­ric of our econ­omy. The “cost of doing busi­ness” that involve buy­ing any­thing — from basic com­modi­ties, intermediate/refined prod­ucts, or the final con­sumer good — will some­how involve buy­ing from an oligarch-owned indus­try. And the less refined the prod­uct, the more likely it is that it’s from an oligarch-run sec­tor of the econ­omy (get the first “cut” on the resource). At least, that’s a gen­eral pat­tern I’ve observed: aside from the finan­cial sec­tor, there are just an enor­mous num­ber of oli­garchs that have their empires rooted in the extrac­tion some nat­ural resource (mining/oil/agriculture). That’s espe­cially true for the developing-world oli­garchs where nat­ural resource extrac­tion is one of the pri­mary things the coun­try has to trade with the world (so, of course, that wealth from extracted local resources gets extracted by elite ass­holes, local and global).

So even if some­one isn’t work­ing directly for an oligarch-owned firm nearly all of us are some­how enabling our oli­garchs, directly or indi­rectly, local and global.

It’s sys­tem­i­cally inevitable that you end up with an econ­omy like this when so many indus­tries are allowed to col­lapsed to hand­ful of core com­pa­nies. That eco­nomic con­cen­tra­tion has been a gen­eral trend for decades and it’s Rom­ney & Friends that ended up being both the most influ­en­tial own­ers (not nec­es­sar­ily biggest, but most influ­en­tial), and the deal-makers of the trans­ac­tions that cre­ated our newly con­cen­trated econ­omy. Mit­tens took his mil­lions and made bil­lions that core. and not just due to cor­rup­tion and inten­tional rig­ging. The “Free-markets” that are largely free of anti-trust enforce­ment are just going to see the exist­ing monopolies/oligopolies just take over more and more indus­tries and cre­ate an econ­omy where some group of oli­garchs cap­tures the prof­its all along a grow­ing num­ber of sup­ply chains and sec­tors. And they’ll be inter­wo­ven sup­ply chains and sec­tors as this goes on over the decades.

And, in due time, you’ll end up with some­thing awful like the mod­ern econ­omy, where not only are our actions increas­ingly com­modi­tized in an oligarch-friendly way but now, in the observation-for-profit age, our com­modi­tized actions are being tracked for even more profit. And, not sur­pris­ingly, our com­mer­cial­ized actions are increas­ingly inter­wo­ven, both in work and play, at home and out and about. Between Google, Face­book, smartphone/cell activ­ity, gen­eral inter­net track­ing, and all our non-cash com­mer­cial activ­ity we are cre­at­ing a world where basic day to day activ­i­ties are prof­it­ing many of our crap­pi­est oligarchs.

So don’t worry too much about work­ing sev­eral degrees removed from Bain. We all are. The world has become a sick ver­sion of Six Degrees of Kevin Bacon, but with Mitt as our reality-magnet. And you could swap Mitt out for any of his other oli­garch bud­dies although they might not be as telegenic (although I have to say I’ve been sur­prised by the gaffe-rate by Rom­ney. He’s not exactly new at this). And most of us are some­one work­ing for, directly or indi­rectly, at least one of those oli­garchs. That’s what an oli­garchy looks like. And that’s what real­ity should feel like. That it doesn’t feel like that to every­one — feel your Mit­tness folks, it courses through your real­ity — is one of the big chal­lenges of the day.

As peo­ple say: it’s their world, we’re just liv­ing in it. Part of what makes Mit­tens so scary is that he seems to be the front man for the tran­si­tion to the world where it’s not just their world we’re liv­ing in. It’s their world, and we’re just liv­ing in it at their dis­cre­tion. What Mit­tens did as a cor­po­rate raider is what he’s going to do as a pres­i­dent except replace “cor­po­rate enti­ties” with “swaths of society/Grandma”. It’s Mitt’s America.

BloombergRajoy Says He May Use Pub­lic Funds to Clean Up Span­ish Banks
By Charles Penty and Emma Ross-Thomas — May 7, 2012 4:22 AM CT

Span­ish Prime Min­is­ter Mar­i­ano Rajoy opened the door to using pub­lic funds to clean up Span­ish lenders and said the gov­ern­ment will pass a decree this week to bol­ster con­fi­dence in the banks.

“The last thing I want to do is lend pub­lic money, as has been done in the past, but if it were nec­es­sary to get the credit to save the Span­ish bank­ing sys­tem, I wouldn’t renounce that,” he said in an inter­view with radio sta­tion Onda Cero today. He didn’t give details on the decree that will be passed on May 11.

Spain’s gov­ern­ment tight­ened pro­vi­sion­ing rules in Feb­ru­ary to make banks rec­og­nize deeper real-estate losses and is now work­ing on a plan to allow lenders to offload written-down assets into sep­a­rate vehi­cles. Spain has tried to shield its pub­lic finances from the cost of clean­ing up the banks and ruled last year that the indus­try would bear the cost of restruc­tur­ing failed lenders.

Rajoy said the gov­ern­ment hasn’t decided whether pub­lic funds will be used and in any case it wouldn’t affect the deficit, which is the third largest in the euro region. Using pub­lic funds would be a “last resort,” he said.

“I am not in favor of a bad bank,” Rajoy said. “The main aim of the decree is that there should be no doubts about the sit­u­a­tion of Span­ish banks.”

BERLIN, May 7 (Reuters) — Ger­many is rul­ing out any sub­stan­tive shift in its approach to Europe’s debt cri­sis despite a ris­ing cho­rus of oppo­si­tion to Berlin’s aus­ter­ity poli­cies that reached a crescendo in Sunday’s elec­tions in Greece and France.

Chan­cel­lor Angela Merkel, speak­ing in Berlin on Mon­day, rejected the notion that Europe was on the brink of a major pol­icy shift after Social­ist Fran­cois Hol­lande defeated her fel­low con­ser­v­a­tive Nico­las Sarkozy and Greek vot­ers pun­ished rul­ing par­ties who slashed spend­ing to secure a for­eign bailout.

Shunned by Merkel, who pub­licly backed Sarkozy’s cam­paign, Hol­lande repeat­edly crit­i­cised Germany’s focus on bud­get cuts and labour law reforms as the solu­tion to Europe’s debt cri­sis. Many saw his vic­tory and the out­come in Greece as herald­ing a shift in Europe toward higher-spending growth-oriented policies.

But close Merkel allies made clear within hours that the expec­ta­tion in Berlin was that it would be Hol­lande who would be mak­ing the lion’s share of the con­ces­sions, and row­ing back on pol­icy promises made dur­ing the French cam­paign which the Ger­mans view as dan­ger­ous for the entire single-currency bloc.

“The posi­tion of the Ger­man gov­ern­ment is clear. We will con­tinue on our sav­ings path,” said Volker Kauder, par­lia­men­tary leader of Merkel’s con­ser­v­a­tives and one of her clos­est allies.

After another bad night for her Chris­t­ian Democ­rats (CDU) in a state elec­tion on Sun­day, Merkel knows that if she is to win a third term next year she can ill afford to ignore Ger­man vot­ers’ demands that she give no more of their cash away to foreigners.

...

Pressed repeat­edly at a news con­fer­ence on whether the French and Greek votes might change the pol­icy debate in Europe, Merkel’s spokesman Stef­fen Seib­ert insisted the only way for­ward was growth through struc­tural reform — such as of tax and labour rules aimed at improv­ing trade — not debt-funded stim­u­lus plans.

Merkel her­self made clear that, while there was scope to dis­cuss tac­tics, the over­all strat­egy EU lead­ers com­mit­ted to by agree­ing a com­pact on fis­cal con­sol­i­da­tion was “not negotiable”.

“We are in the mid­dle of a debate to which France, of course, under its new pres­i­dent will bring its own empha­sis,” she said. “But we are talk­ing about two sides of the same coin — progress is only achiev­able via solid finances plus growth.”

...

Ger­many has already sig­naled it is ready to nego­ti­ate a “growth pact” with the new French leader. Though its terms may well be vague, that would allow Hol­lande to claim vic­tory in his push for a more bal­anced approach to the crisis.

But bold new ini­tia­tives that might give ail­ing economies like Greece and Spain a sub­stan­tial boost are unlikely.

On Greece, offi­cials in Berlin and Brus­sels are also tak­ing a hard line, mak­ing clear they see no room for the coun­try to renege on or rene­go­ti­ate the terms set out in its multi-billion euro res­cues by the bloc and the IMF.

The fail­ure of the big par­ties that have dom­i­nated Greek pol­i­tics for decades to secure a major­ity, and a surge in sup­port for extreme par­ties from the left and right, has raised ques­tions about whether Athens will stick to its com­mit­ments and sparked spec­u­la­tion it could be forced out of the euro zone.

“Either they stick to the pro­gramme and receive the financ­ing from mem­ber states — or they will have to default,” said a senior euro zone source before the pro-EU Greek Social­ist party leader called explic­itly for a rene­go­ti­ated bailout deal.

“What the default would lead to, I don’t know,” the source said. “But cer­tainly to even more hard­ship for Greek citizens.”

Greece is still up in the air but hope­fully the left­ists can get their act together and pull off a vic­tory. Because if the con­ser­v­a­tives remain in power, espe­cially if Golden Dawn decides to ally with them(not at all implau­si­ble and it could just hap­pen!), they will be in DEEP trouble.